Small business tax rates vary from locality to locality so it is extremely important to determine what the rate is. This can be done by contacting a local agency and/or tax consultant. Be aware that there are several levels of taxes that need to be paid by a small business. First of all, there is the local level such as a city or county in which a business tax needs to be paid. Secondly, there is a state tax and finally the federal (IRS) tax to be paid. The size, gross and type of business determines the tax rate that needs to be paid.
Local Tax Rates
You need to get a business license to operate a business in most locations. Depending upon the industry that your business qualifies for, your tax rate can be at 1 percent or as high as 4 percent. The forms sent to you by the locality will indicate the rate. By multiplying this rate by the amount of your gross income, you will determine the amount of sales tax you need to pay.
State and Federal Taxes
The state and federal taxes are not determined by the type of industry your business is categorized as, but rather by the total amount of income it generates. However, obviously the more income it earns, the higher the percentage of taxes it will pay. It is therefore important to track all monies received and all expenses paid in order to receive the maximum amount of deductions allowed. This will save you in the amount of taxes to be paid for both the state and federal level.